Henry Schein 2008 Investor Relations Presentation
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Transcript of Henry Schein 2008 Investor Relations Presentation
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NASDAQ: HSICwww.henryschein.com
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HSIC is the largest distributor of healthcare productsand services to office-based practitioners
Serving Dental, Physician and Animal Health practitioners
Broad range of value-added products and services
• One-stop shop for our customers
Operations or affiliates in 23 countries
Fortune 500 ® company
Member of the NASDAQ 100 ® Index
Corporate Overview
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1995 Worldwide Sales:$616 million 2009 Worldwide Sales:$6.5 billion
Dental
52%
Tech
4%
Int'l
17%Medical
27%
Medical22%
Dental
38%
Tech
3%
Int'l37%
From Continuing Operations
14 Years as a Public Company
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Serving Large and Growing Markets
(1) Includes Animal Health(2) Proforma includes Butler Animal Health
Share Size Share Size
Market ($ in billions) Market ($ in billions)
U.S. & Canada Dental 11% $ 3.0 U.S. & Canada Dental 40% $ 6.0
U.S. Medical(1)
3% 4.8 U.S. Medical 17% 7.0Europe Dental 5% 2.2 U.S. Veterinary (2) 28% 3.0
TOTAL 6% $10.0 Europe Dental 19% 7.5
Europe Medical 3% 3.0
Europe Veterinary 24% 2.5
TOTAL 23% $29.0
1995 2009
Consistent Market Growth
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Attractive Market Dynamics
(1) U.S. Census Bureau
75m
93m
115m
131m
144m
30m
60m
90m
120m
150m
180m
1990 2000 2010 2020 2030
U . S .
P o p u l a t i o n A g
e 4 5 - 8 4 ( m i l l i o n s ) 1
45-84 year-old population projected toalmost double between 1990-2030
Aging Population Driving Healthcare Spending
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Consistent Growth
Recession Resistant
Fragmented Competitors
Positive Business Environment
Fragmented Customer Base
Markets Served
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Efficiency
Productivity
Profitability
Allowing our customers to focus ondelivering quality care to their patients
Company Objective
ImprovePractice
Our primary objective is to
partner with our customers
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Key Company Strengths
1) Unique Sales and Marketing Expertise
2) Centralized Leveragable Infrastructure
3) Broad Product and Services Offering
4) Superior Customer Service
5) Large Practice Management User Base
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1. Unique Sales and Marketing Expertise
• Strong brand identity with over 75 years ofexperience
• Extensive direct marketing programs
• Highly-trained sales professionals
2,750 field sales consultants and specialists
1,400 telesales representatives
Extensive training to develop consultative
selling skills
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Reps visit the website regularly
Extensive Consultative Selling Skills
Classroom and Web-Based Training
ClinicalTechniques
PracticeManagement
Solutions
Products
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Driving more productive
customer interactions
Customer Analysis Tool (CAT)
Proprietary call planning system Color coding ranks sales activity
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75-80% Utilization……With Capacity for Growth
2. Centralized Leveragable Infrastructure
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3. Broad Product and Services Offering
90,000 SKUsin stock
100,000special orderitems
available
~20,000proprietaryproducts
Competitive Prices
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Exclusive Product Offerings
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Design Services
Value-Added Services
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4. Superior Customer Service
• 24/7 ordering by mail, fax,
telephone, CD-Rom and Web
• Customer Service Statistics:
North America Worldwide
Order fulfillment 99% 99%
Orders shipped same day 99% 99%
Orders delivered in 2 days 99% 99%
Orders delivered next day 90% 95%
Order accuracy 99.9% 99.9%
• 2009 electronic sales up over 11%
• Innovative Customer Loyaltyprograms
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Innovative Customer Loyalty Programs
• Designed to attract, retain, and reward preferred customers
• Over 27,500 U.S. Dental members, 11,000 U.S.
Medical members, and 8,000 International members
• Drives faster sales and electronic ordering growth
• Similar programs active in 6 international markets
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5. Practice Management Solutions
Large User Base
Helping our customers become more
efficient and profitable
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Key Strategies for Future Growth
• Expand value-added products and services• Practice management software
• Financing, Credit card processing and e-claims
• Continuing education
• Increase customer penetration• Customer loyalty programs
• Equipment sales and repair services
• Increase number of new customers
• Increase number of field sales consultants
Transition from a Pure Distribution Company
Goal - Partner With Customers to Improve Quality of Care
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Key Strategies for Future Growth
• Continue to develop the specialty business• Implants, orthodontics, surgical, dermatology and pediatrics
• Expand product and service offering• Additional exclusive and semi-exclusive distribution agreements
• Realize sourcing synergies and supply chain initiatives• Globalize inventory management
• Increase sales of Henry Schein proprietary products
• Pursue strategic acquisitions
Pursue Complementary Initiatives…
… To Accelerate Sales and Operating Income Growth
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Recent Acquisition
On January 4, 2010, Henry Schein, Inc. announced the formation ofButler Schein Animal Health.
• Creates the largest distributor of products and services tothe U.S. Companion Animal market
• LTM combined sales of approximately $850 million
• $620 million incremental sales to HSIC’s existing business
• Consolidated subsidiary 50.1% - owned
• National presence with 300 field sales representatives and200 telesales and customer support representatives
• Slightly dilutive (2 to 4¢) in 2010 primarily due to integrationexpenses
• Accretive (2 to 4¢) in year 2
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Financial Update
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Safe Harbor Provision
In accordance with the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, we provide the
following cautionary remarks regarding important factors that, among others, could cause future results to differ materiallyfrom the forward-looking statements, expectations and assumptions expressed or implied herein. All forward-lookingstatements made by us are subject to risks and uncertainties and are not guarantees of future performance. These forward-
looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,performance and achievements or industry results to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements. These statements are identified by the use of suchterms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate” or other comparableterms. A full discussion of our operations and financial condition, including factors that may affect our business and futureprospects, is contained in documents we have filed with the SEC and will be contained in all subsequent periodic filings wemake with the SEC. These documents identify in detail important risk factors that could cause our actual performance todiffer materially from current expectations.Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include,
but are not limited to: decreased customer demand and changes in vendor credit terms; disruptions in financial markets;general economic conditions; effects of a highly competitive market; changes in the healthcare industry; changes inregulatory requirements; risks from expansion of customer purchasing power and multi-tiered costing structures; risksassociated with our international operations; fluctuations in quarterly earnings; our dependence on third parties for themanufacture and supply of our products; transitional challenges associated with acquisitions, including the failure to achieveanticipated synergies; financial risks associated with acquisitions; regulatory and litigation risks; the dependence on ourcontinued product development, technical support and successful marketing in the technology segment; risks from disruptionto our information systems; our dependence upon sales personnel, manufacturers and customers; our dependence on oursenior management; possible increases in the cost of shipping our products or other service issues with our third-partyshippers; risks from rapid technological change; possible volatility of the market price of our common stock; certainprovisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation.The order in which these factors appear should not be construed to indicate their relative importance or priority.We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control orpredict. Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction of actualresults. We undertake no duty and have no obligation to update forward-looking statements.
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18%
26%29bp
28%
17%
Sales
Operating IncomeOperating Margin
Net Income
Diluted EPS
$616.2
$19.33.1%
$9.1
$0.34
1995
$6,538.3
$468.77.2%
$289.5
$3.20
CompoundAnnual
Growth Rate2009
From continuing operations and excluding certain non-recurring items.
Growth Since Going Public
($ in millions, except per share data)
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Full Year 2009
FY09 GrowthFY08
($ in millions, except per share data)
Sales $6,538.3 $6,380.4 2.5%
Operating Income $468.7 $442.5 5.9%
Operating Margin 7.17% 6.94% 23 bp
Net Income $289.5 $266.4 8.7%
Diluted EPS $3.20 $2.92 9.6%
From continuing operations and excluding certain non-recurring items.
Financial Highlights
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Net Sales
4,513
5,022
5,890
6,380 6,538
$1,000
$3,000
$5,000
$7,000
2005 2006 2007 2008 2009
($ in millions)
From Continuing Operations.
19%
11% 17%
8%
CAGR 12%
2%
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Long-Term Financial Objectives
¹Local currency ²Adjusted for extra week in 2005 ³Adjusted to exclude sales of certain lower-margin pharmaceutical products
2005 2006 ² 2007 2008 ³ 2009 Internal 8% 7% 7% 4% 1%Acquisition 11% 5% 7% 6% 5%
Total Sales Growth 19% 12% 14% 10% 6%As originally reported except as noted
Actual Sales Growth ¹
Future sales growth will be a balance
of internal growth and acquisitions
Goal:
• To continue to grow internal sales faster thanmarket
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Strategic Acquisitions
Key Strategic Benefit 2005
• Ash Temple Expands presence in Canadian Dental market $100m• Halas / Shalfoon Strengthens position in Australia and New Zealand $60m
2006 • NLS Animal Health Expands presence in U.S. Veterinary market $110m• Darby Companies Strengthens U.S. Dental, Medical and Lab presence $220m• Provet Expands presence in European Veterinary market $50m
2007
• Software of Provides leading position in U.K. Dental Software market $20mExcellence• W&J Dunlop Expands presence in European Veterinary market $340m
2008 • Minerva Dental Expands full-service dental presence in U.K. $40m
2009 • Noviko Expands Veterinary presence in the Czech Republic $70m
• DNA Anthos Strengthens Dental equipment presence in Italy $43m• Medka Expands Medical presence in Germany $36m• Ortho Organizers Provides entrée into orthodontic market $30m
2010 • Butler Creates US market leader in companion animal health $620m
Successfully integrated over 30 acquisitions since 2000
Revenue 1
1 Represents the approximate revenue in the fiscal year prior to acquisition or expectation for revenue contribution in the 12 months immediately following acquisition date.
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$262
$304
$387
$443 $469
$0
$100
$200
$300
$400
$500
2005 2006 2007 2008 2009
($ in Millions)
Operating Income and Margin
16%
From continuing operations and excluding certain non-recurring items.
27%
14%
6%
5.8% 6.1% 6.6% 6.9% 7.2%OperatingMargin
28%
CAGR 18%
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Actual Results: 1995 2009
Operating Margin 3.1% 7.2%
Long-Term Financial Objectives
From continuing operations and excluding certain non-recurring items.
Average 29 bp annual increase since going public
Goals:
• Balanced internal and acquisition sales growth• Continued operating margin expansion
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Diluted EPS and Net Income
$1.67
$2.00
$2.55
$2.92$3.20
$0.00
$1.00
$2.00
$3.00
2005 2006 2007 2008 2009
21% 20% 28%
15%
From continuing operations and excluding certain non-recurring items.
$147.8 $180.0 $232.5 $266.4 $289.0NetIncome
CAGR 18%
10%
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Long-Term Financial Objectives
Actual Results:
1995 2009
EPS $.34 $3.20
All amounts from continuing operations and excluding certain non-recurring items.
17% CAGR since going public
Goals:
• Balanced internal and acquisition sales growth• Continued operating margin expansion
• Predictable Earnings Per Share growth
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Operating Cash Flow
$254.9
$50.8
$235.5
$67.0
$270.3
$56.8
$384.8
$50.9
$396.9
$51.6
$0.0
$100.0
$200.0
$300.0
$400.0
2005 2006 2007 2008 2009
Operating Cash Flow Capital Expenditures
($ in Millions)
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Long-Term Financial Objectives
Goals:
• Balanced internal and acquisition sales growth
• Continued operating margin expansion
• Predictable Earnings Per Share growth
All amounts are from continuing operations restated to exclude certain non-recurring items and restructuring costs.
Since 2005 operating cash flow has exceeded net income by over $400 million
• Strong cash flow from operations
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Strong Balance Sheet
Cash & Equiv.
Working Capital
Total Assets
Total Debt
Equity
DSO
Inventory Turns
Net Debt to Total
Capitalization Ratio
28.0%
24.0%
19.4%17.1%
11.0%
0%
10%
20%
30%
40%
2005 2006 2007 2008 2009
Debt to Total Capitalization Ratio
$471.2
$1,127.3
$3,836.0
$267.9
$2,161.5
38.0 days
6.5x
-10.4%
($ in millions)
December 26, 2009
HSIC has a $400m committed credit line through 2013 at an attractive interest rate.
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Investment Merits
• Leading presence in fragmented growing markets
• Providing high quality service to office-basedhealthcare practitioners
• Strong brand recognition
• Highly experienced management team
• Excellent growth opportunities